Effect On Capital Gains By Shifting Base Year


The Key Point In The Budget 2017-18 For Calculation Of Capital Gains The Base Year is Shifted From 1981-82 To 2001-02. Now The Question Arises That On Shifting The Base Year The Tax Payers Will Have To Pay More Tax /Less Tax Or Shall Have No Effect In Terms Of Long Term Capital Gain.

(This Is What I Think)

1. If Anybody Has Purchased The Land Prior To Fin Year 2001-02 Then The Cost Of Land Will Be Taken As FMV Or Circle Rate Of That Land As On 01/April/2001 And Indexation Will Be Calculated Accordingly At That Price (As On 01/04/2001)

2. If Any One Has Purchased Land After 2001-02 Then The Indexation Cost Will Be Calculated According To New CII Values (Not Yet released By CBDT).

Now Look At The Chart Below Since We Cannot Change The Inflation Rate During These Years Then 100 As CII For Base Year 2001-02. The Values For The Fin Year Respectively Will Be As Shown In Column 04 Of The Table.


NEW CII ACCORDING TO ME

S No

Fin Year

CII(Base Year)

Inflation (%)

1981-82

2001-02

1

2001-02

426

100

-

2

2002-03

447

105

4.93

3

2003-04

463

109

3.58

4

2004-05

480

113

3.67

5

2005-06

497

117

3.54

6

2006-07

519

122

4.43

7

2007-08

551

129

6.17

8

2008-09

582

137

5.63

9

2009-10

632

148

8.59

10

2010-11

711

167

12.50

11

2011-12

785

184

10.41

12

2012-13

852

200

8.54

13

2013-14

939

220

10.21

14

2014-15

1024

240

9.05

15

2015-16

1081

254

5.57

16

2016-17

1125

264

4.07


Illustration: Assuming That 'A' Is Below 60 Years (No Other Deduction Taken i.e. Brokerage, Improvement)

When Base Year Was 1981-82
Case 1:- Purchased Prior To Fin Year 2001-02


Purchase

Sale

Fin Year 1984-85

Fin Year 2016-17

1,00,000

20,00,000

Calculation Of Capital Gain

Net Sale Consideration

20,00,000

Indexed Cost Of Acquisition

9,00,000 (i.e. 1,00,000*1125/125)

Net Capital Gain

11,00,000 (i.e. 20,00,000-9,00,000)

Tax

1,70,000 (i.e. 20% Of 11,00,000-2,50,000)


Case2:- Purchased After Fin Year 2001-02


Purchase

Sale

Fin Year 2002-03

Fin Year 2016-17

1,00,000

20,00,000

Calculation Of Capital Gain

Net Sale Consideration

20,00,000

Indexed Cost Of Acquisition

2,51,680 (i.e. 1,00,000*1125/447)

Net Capital Gain

17,48,320 (i.e. 20,00,000-2,51,680)

Tax

2,99,664 (i.e. 20% Of 17,48,320-2,50,000)


Shifting Base Year To 2001-02
Case1:-Purchased Prior To Fin Year 2001-02


Purchase

Sale

Fin Year 1984-85

Fin Year 2016-17

1,00,000

20,00,000

Now Suppose The FMV Or Circle Rate Of That Land On 01/04/2001 was 5,00,000

Calculation Of Capital Gain

Net Sale Consideration

20,00,000

Indexed Cost Of Acquisition

13,20,000 (i.e. 5,00,000*264/100)

Net Capital Gain

6,80,000 (i.e. 20,00,000-13,20,000)

Tax

86000 (i.e. 20% Of 6,80,000-2,50,000)


Case2:- Purchased After Fin Year 2001-02


Purchase

Sale

Fin Year 2002-03

Fin Year 2016-17

1,00,000

20,00,000

Calculation Of Capital Gain

Net Sale Consideration

20,00,000

Indexed Cost Of Acquisition

2,51,428 (i.e. 1,00,000*264/105)

Net Capital Gain

17,48,572(i.e. 20,00,000-2,51,428)

Tax

2,99,715(i.e. 20% Of 17,48,572-2,50,000)


It Is Clear From The Illustration That Tax Payers Whose Asset Is Prior To 2001-02 Will Have To Pay Less Tax In Many Cases But Whose Asset Is After Fin Year 2001-02 Will Have To Pay Little More Taxes.

(This Is My Own View It May Be Right Or Wrong)

More »


Mukesh Kuriyal 
on 25 February 2017
Published in Taxpayers
Views : 4889
Other Articles by - Mukesh Kuriyal
Report Abuse

Total likes : 2 times







×
close x
Online GST Class    |    x